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Exhibit 99
SAFE HARBOR UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
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The Private Securities Litigation Reform Act of 1995 (the "Act") provides a
"safe harbor" for forward-looking statements to encourage companies to provide
prospective information about their companies, so long as those statements are
identified as forward-looking and are accompanied by meaningful cautionary
statements identifying important factors that could cause actual results to
differ materially from those discussed in the statement. Potters Financial
Corporation desires to take advantage of the "safe harbor" provisions of the
Act. Certain information, particularly information regarding future economic
performance and finances and plans and objectives of management, contained or
incorporated by reference in Potters Financial Corporation's Report on Form
10-QSB for the fiscal quarter ended March 31, 1998 is forward-looking. In some
cases, information regarding certain important factors that could cause actual
results of operations or outcomes of other events to differ materially from any
such forward-looking statement appear together with such statement. In addition,
forward-looking statements are subject to other risks and uncertainties
affecting the financial institutions industry, including, but not limited to,
the following:
Interest Rate Risk
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Potters Financial Corporation's operating results are dependent to a significant
degree on its net interest income, which is the difference between interest
income from loans and investments and interest expense on deposits and
borrowings. The interest income and interest expense of Potters Financial
Corporation change as the interest rates on mortgages, securities and other
assets and on deposits and other liabilities change. Interest rates may change
because of general economic conditions, the policies of various regulatory
authorities and other factors beyond Potters Financial Corporation's control.
The interest rates on specific assets and liabilities of Potters Financial
Corporation will change or "reprice" in accordance with the contractual terms of
the asset or liability instrument and in accordance with customer reaction to
general economic trends. In a rising interest rate environment, loans tend to
prepay slowly and new loans at higher rates increase slowly, while interest paid
on deposits increases rapidly because the terms to maturity of deposits tend to
be shorter than the terms to maturity or prepayment of loans. Such differences
in the adjustment of interest rates on assets and liabilities may negatively
affect Potters Financial Corporation income. Moreover, rising interest rates
tend to decrease loan demand in general, negatively affecting Potters Financial
Corporation income.
Possible Inadequacy of the Allowance for Loan Losses
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The Potters Savings and Loan Company maintains an allowance for loan losses
based upon a number of relevant factors, including, but not limited to, trends
in the level of nonperforming assets and classified loans, current and
anticipated economic conditions in the primary lending area, past loss
experience, possible losses arising from specific problem assets and changes in
the composition of the loan portfolio. While the Board of Directors of The
Potters Savings and Loan Company believes that it uses the best information
available to determine the allowance for loan losses, unforeseen market
conditions could result in material adjustments, and net earnings could be
significantly adversely affected if circumstances differ substantially from the
assumptions used in making the final determination.
Loans not secured by one-to-four family residential real estate are generally
considered to involve greater risk of loss than loans secured by one-to-four
family residential real estate due, in part, to the effects of general economic
conditions. The repayment of multifamily residential and nonresidential real
estate loans generally depends upon the cash flow from the operation of the
property, which may be negatively affected by national and local economic
conditions that cause leases not to be renewed or that negatively affect the
operations of a commercial borrower.
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Construction loans may also be negatively affected by such economic conditions,
particularly loans made to developers who do not have a buyer for a property
before the loan is made. The risk of default on consumer loans increases during
periods of recession, high unemployment and other adverse economic conditions.
When consumers have trouble paying their bills, they are more likely to pay
mortgage loans than consumer loans, and the collateral securing such loans, if
any, may decrease in value more rapidly than the outstanding balance of the
loan.
Competition
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The Potters Savings and Loan Company competes for deposits with other savings
associations, commercial banks and credit unions and issuers of commercial paper
and other securities, such as shares in money market mutual funds. The primary
factors in competing for deposits are interest rates and convenience of office
location. In making loans, The Potters Savings and Loan Company competes with
other savings associations, commercial banks, consumer finance companies, credit
unions, leasing companies, mortgage companies and other lenders. Competition is
affected by, among other things, the general availability of lendable funds,
general and local economic conditions, current interest rate levels and other
factors which are not readily predictable. The size of financial institutions
competing with The Potters Savings and Loan Company is likely to increase as a
result of changes in statutes and regulations eliminating various restrictions
on interstate and inter-industry branching and acquisitions. Such increased
competition may have an adverse effect upon Potters Financial Corporation.
Legislation and Regulation that may Adversely Affect The Potters Savings and
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Loan Company's Earnings
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The Potters Savings and Loan Company is subject to extensive regulation by the
Office of Thrift Supervision (the "OTS") and the Federal Deposit Insurance
Corporation (the "FDIC") and is periodically examined by such regulatory
agencies to test compliance with various regulatory requirements. As a savings
and loan holding company, Potters Financial Corporation is also subject to
regulation and examination by the OTS. Such supervision and regulation of The
Potters Savings and Loan Company and Potters Financial Corporation are intended
primarily for the protection of depositors and not for the maximization of
shareholder value and may affect the ability of the company to engage in various
business activities. The assessments, filing fees and other costs associated
with reports, examinations and other regulatory matters are significant and may
have an adverse effect on Potters Financial Corporation's net earnings.
The FDIC is authorized to establish separate annual assessment rates for deposit
insurance of members of the Bank Insurance fund (the "BIF") and the Savings
Association Insurance Fund (the "SAIF"). The FDIC may increase assessment rates
for either fund if necessary to restore the fund's ratio of reserves to insured
deposits to the target level within a reasonable time and may decrease such
rates if such target level has been met. The FDIC has established a risk-based
assessment system for both SAIF and BIF members. Under such system, assessments
may vary depending on the risk the institution poses to its deposit insurance
fund. Such risk level is determined by reference to the institution's capital
level and the FDIC's level of supervisory concern about the institution.
Congress enacted a plan to recapitalize the SAIF in 1996. The recapitalization
plan also provides for the merger of the SAIF and BIF effective January 1, 1999,
assuming there are no savings associations under federal law. Congress is
considering legislation to eliminate the federal thrift charter and the separate
federal regulation of savings and loan associations. As a result, The Potters
Savings and Loan Company may have to convert to a different financial
institution charter or might be regulated under federal law as a bank. If The
Potters Savings and Loan Company becomes a bank or is regulated as a bank, it
would become subject to the more restrictive activity limitations imposed on
national banks. Moreover, Potters Financial Corporation might become subject to
more restrictive holding company requirements, including activity limits and
capital requirements similar to those imposed on The Potters Savings and
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Loan Company. Potters Financial Corporation cannot predict the impact of the
conversion of The Potters Savings and Loan Company to, or regulation of The
Potters Savings and Loan Company as, a bank until any legislation requiring such
change is enacted.
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